Aircraft supply with maintenance services deemed composite supply under section 2(30) attracting 5% GST rate

The AAR Gujarat ruled that the supply of aircrafts with maintenance services constitutes a composite supply under section 2(30) of CGST Act, with aircraft being the principal supply. The supply is classified under CTH 8802 attracting 5% GST. Following Chhattisgarh HC precedent in Shree Jeet Transport, free items supplied by Airbus must be included in GST valuation. The authority held that GST on advances for goods supply is not required per notification 66/2017-CT dated 15.11.2017.

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Issues Involved:
1. Nature of Supply
2. Classification and Rate of Tax
3. Value for Payment of GST
4. Time of Supply for Payment of GST

Summary:

1. Nature of Supply:
The primary issue was whether the contract between the applicant and Airbus would qualify as a 'supply of goods' or 'supply of services.' The applicant argued that the contract entails the supply of goods, specifically 40 C-295 aircrafts, despite also providing support services. The Authority for Advance Ruling (AAR) determined that the contract is a composite supply under Section 8(a) of the CGST Act, 2017, where the principal supply is the supply of aircrafts, and the support services are incidental and ancillary to this principal supply.

2. Classification and Rate of Tax:
The applicant contended that the supply of aircrafts should be classifiable under CTH 8802 and attract GST at 5% as per entry 244 of Notification No. 1/2017-IT (Rate) dated 28.06.2017. The AAR agreed, holding that the aircrafts are classifiable under CTH 8802 and will attract GST at 5%.

3. Value for Payment of GST:
The issue was whether the value of Free Issue Materials (FIMs) supplied by Airbus should be included in the transaction value for GST purposes. The applicant argued that FIMs should not be included in the value of supply as they are provided free of cost due to contractual obligations. However, the AAR, referencing the Chhattisgarh High Court's decision in M/s. Shree Jeet Transport, held that the value of FIMs should be included in the transaction value under Section 15(2)(b) of the CGST Act, 2017, as they are essential components provided by Airbus.

4. Time of Supply for Payment of GST:
The applicant argued that GST should not be paid on receipt of advance in the case of supply of goods, citing Section 12(2) of the CGST Act and Notification No. 66/2017-CT dated 15.11.2017. The AAR agreed, concluding that the applicant is not required to pay GST on advances received for the supply of goods.

Ruling:
1. The nature of supply under the contract is a composite supply with the principal supply being the supply of aircrafts.
2. The aircrafts are classifiable under CTH 8802 and will attract GST at 5%.
3. The value for payment of GST will include the value of FIMs supplied by Airbus.
4. The time of supply for payment of GST will be as per Section 12 of the CGST Act, 2017, and advances received are not subject to GST.

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